Maryland AG, Wells Reach Settlement On Charges Involving Alleged "Pick-A-Pay" Mortgage Loan Ripoffs

In Baltimore, Maryland, The Baltimore Sun reports:

• Under an agreement announced Thursday by the Maryland Attorney General's Office, Wells Fargo has agreed to make loan modifications and pay nearly $1 million in restitution to customers of two lenders acquired by the bank.



• The office's Consumer Protection Division, which reached the agreement with Wells Fargo, said lenders Wachovia and Golden West Financial used deceptive marketing in offering consumers adjustable-rate home loans.



• Wells Fargo will pay $940,056 to borrowers with "Pick-a-Payment" mortgages written by Wachovia and Golden West who lost their homes in foreclosure, the agreement says. Wells Fargo acquired the two lenders in 2008. So far about 250 borrowers in Maryland with "Pick-a-Payment" mortgages are known to have lost their homes to foreclosure, but that number could grow, said David Paulson, a spokesman for the Attorney General's Office.



• In addition to the agreement in Maryland, Wells Fargo has signed similar pacts with attorneys general in 11 states.

For the story, see Wells Fargo agrees to pay restitution to mortgage borrowers (Consumer Protection Division alleges deceptive marketing of loans).

Another Homeowner Needing Home Loan Modification Gets Put Through BofA Wringer

In Phoenix, Arizona, KPHO-TV Channel 5 reports:

• A Valley man calls it a rude awakening. Potential buyers knocked on this door Tuesday morning, saying his house was up for auction. "It made me angry," said Ryan Huber, homeowner.



• Huber, who grew up in the home and currently shares it with his mother, said he called the bank to tell them the sale was a mistake – that they received letters from Bank of America saying they had been approved for loan modification. He said the bank representative confirmed it was a mistake, but he's still nervous about how things will shake out.



• "We've been fighting with Bank of America since about July," said Huber. "Every time, we do what they ask of us, and something else comes up or they change it or reject what we send them, even though it's exactly what they asked for."



• Huber said the whole ordeal has been stressful and frustrating to the point of tears. "It's not right," said Huber.



• CBS 5 News reached out to Bank of America Tuesday afternoon after receiving Huber's call. A bank representative emailed, saying, "We are having the report researched, but there has not been adequate time to confirm details of the account for your story. If an unwarranted foreclosure takes place, the sale usually will be rescinded. If this is the case here, the bank will work with the Hubers to rectify the situation quickly."

Source: Man OK'd for home loan modification gets a surprise.

Family Duped Into Leasing Home With Unpaid Mortgage Caught Between Rent Skimming Landlord, Foreclosing Fannie

In Acworth, Georgia, WSB-TV Channel 2 reports:

• A local family says they leased a home, and then a week later they received a Fannie Mae foreclosure notice on the door to move out. “I feel like I have been duped,” explained tenant Sonya Croft.



• Croft says there weren’t any red flags when she signed the lease. The rent was reasonable, she paid a $300 deposit and the landlord allowed her to pay monthly or weekly. But she says what the landlord didn’t tell her is that he was trying to fend off the bank from foreclosing on their Acworth rental home. “He should have made us aware of what was going on. He should have disclosed to us that there was a possibility that this could happen, because he had to know. It didn’t happen in a week and half,” explained Croft.



• Croft’s first call was to her landlord, Robert Lemal. “I contacted him, and he said disregard the notice because he was working on a loan modification,” said Croft.



• Channel 2’s Craig Lucie called Lemal, too. He told Lucie that he didn’t want to do an on-camera interview, but did tell him that he was trying to get a loan modification from the bank. He says the bank foreclosed prematurely. He also told Sonya Croft that he would be cutting off her water and power right before the holidays since she quit paying rent.



• Sonya says there’s reason why she quit paying him. “We were told not to pay him anymore money by Fannie Mae,” said Croft.



• It’s become a lease dilemma that is now so common, there’s a federal law that protects tenants like Sonya Croft. It called the Protecting Tenants Act at Foreclosure. Croft and her family can stay for the remainder of their 12-month lease, but Fannie Mae is now making them an offer to get out.



• The offer is nearly $1700 dollars to move. Croft says she doesn’t know if she wants to move her three children for the third time in a month.

Source: Renters face eviction weeks after moving into foreclosed home.

Lack Of Cash, Unrepaired Defective Boiler Leave Tenants In 100+ Units In Bronx Building Complex In Foreclosure Without Heat, Hot Water

In The Bronx, New York, The Riverdale Press reports:

• It was a cold Christmas at the historic Shalom Aleichem Houses in Kingsbridge Heights. More than 100 apartments at the troubled housing complex were without heat for most of December, including on Dec. 25.



• As Russell and Susan Paige’s family gathered around the table on Christmas Day, they donned winter coats just to keep warm. The Department of Buildings issued a violation for a defective boiler on Christmas Day and according to Mr. Paige, the apartment warmed up again on Dec. 27. But he said his radiator had been ice cold too often up until then. He had to set up a space heater in the living room and Ms. Paige had taken to bundling up with a blanket.



• Approximately 117 of 234 apartments in the 15-building complex, located between Giles Place, Sedgwick Avenue, Cannon Place and West 238th Street, were without heat or hot water at times until Dec. 27, the latest in a long line of problems at the building.



• Last year, tenants complained of no heat, a leaking roof, collapsing ceilings, crumbling walls and other dilapidated conditions. In May, the building went into foreclosure after owner Van Cortlandt Village LLC failed to make mortgage payments and could not negotiate a deal with New York Community Bank. Shortly afterward, the bank sold the mortgage note to Riverdale’s Chestnut Holdings.

***

• The conditions have landed five of the buildings in the complex — however not the buildings without heat — onto Public Advocate Bill de Blasio’s NYC Worst Landlord Watchlist. Buildings at 3058 Godwin Terrace, 2709 Heath Ave. and 2856 Webb Ave. also made the list.

For more, see No heat for Christmas in troubled buildings.

Blaze In Building In F'closure Latest Problem For Tenants In Complex Plagued By Dilapidated Conditions, Lack Of Heat/Hot Water, Freezing Temperatures

In Chicago, Illinois, WGN Radio 720 AM reports:

• Chicago firefighters [last week] quickly extinguished a small fire in a large South Side building that residents said has been without heat and hot water for all but a few hours since the weekend. More than a half-dozen residents of the courtyard building in the 7600 block of South East End Avenue managed to escape without injury, despite early reports of people being trapped, according to fire officials and neighbors.



• The fire may have been caused by a cracked boiler in the building's basement, though an investigation was still under way, a fire department spokesman said.



• The fire that temporarily forced residents into the cold streets was just the latest disruption at a South Shore building plagued with problems since it went into foreclosure, said resident Pachina Scarelli.



• Hot water and heat at the building was cut off without explanation over the weekend, Scarelli said. Scarelli said building officials promised to fix leaky ceilings and broken doorbells when she moved in last May. But the problems worsened after the building was foreclosed on with a South Side property firm temporarily put in charge, she added. Busted ceilings, rain coming through the ceilings, it's just so much stuff going on and this is what we've been dealing with (in) 22-degree weather," she said.



• The building's hot water and heat returned Tuesday evening only to be shut off again because of the fire. "Now we have no hot water, no heat and (some of) the lights are out (because of the fire)," Scarelli said.



• Calls left with the building management company named by Scarelli weren't returned this morning.

For the story, see No heat, no hot water, then fire at South Side apartment building.

Lawsuit: Capital One Illegally Squeezed Short Sale Homeowners On Deficiency Payments

Courthouse News Service reports:

• Homeowners say in a class action that Capital One illegally made them pay thousands of dollars in deficiency contributions after short sales of their homes, though the state prohibited that in 2010.



• Then-Gov. Arnold Schwarzenegger signed Senate Bill 931 into law in late 2010 to reduce foreclosures and boost short sales. Before the law took effect in January 2011, homeowners had no incentive to short sell their homes because while lenders could not obtain a deficiency judgment on foreclosed properties, they could go after homeowners who sold short.



• "However, it quickly became apparent that where there was a second mortgage, the junior lien holder often refused to release the lien and the short sale never went through," according to the complaint.

For more, see Class of Homeowners Sues Capital One Over Short Sales.

For the lawsuit, see Teson v. Capital One, N.A.

Ex-F'closure Mill King Tagged In Suit By His Now-Defunct Document Sweatshop For Allegedly Inflating Income By "Cutting Corners" In Litigation Process

In Fort Lauderdale, Florida, Reuters reports:

• David J. Stern, who became one of the country's best-known foreclosure lawyers before shutting his business under regulatory pressure, has been sued for fraud by the publicly traded company he helped create to take on his now-defunct law firm's back-office operations.



• DJSP Enterprises Inc said Stern, a former chief executive, concealed that his law firm David J. Stern PA inflated revenue by systematically "cutting corners" in the foreclosure process. It said this took place even though the firm knew that such clients as Citigroup Inc, Fannie Mae and Freddie Mac might flee.



• DJSP said the shortcuts included letting workers sign foreclosure documents without reading them, known as "robo-signing," and submitting false or backdated documents to courts. It also said Stern awarded bonuses and "extravagant gifts" to workers who could churn out foreclosures quickly.



• Stern had "specific intent to fraudulently induce DJSP" to assume the back-office operations, the company said. The demise last March of Stern's law firm "directly and necessarily resulted in the destruction of DJSP's business," it added.



• DJSP in January 2010 took on the Stern operations in exchange for paying nearly $60 million in cash to Stern, whose lifestyle included luxury homes and a yacht.

For the story, see Foreclosure lawyer Stern sued by his old company.

Legal Loophole Makes Paying Real Estate Taxes Optional For Some Detroit Homeowners

In Detroit, Michigan, The Detroit News reports:

• Paying property taxes has become optional for a growing number of Detroit landowners using a legal loophole to wipe away debt by buying back their properties in foreclosure.



• As the city nears financial collapse, owners erased at least $4.7 million in property taxes and liens this fall on more than 400 properties Wayne County appeared to sell back to them for pennies on the dollar, according to a Detroit News analysis.



• That's double the number of buybacks found at 2010's Wayne County tax foreclosure auction. In many cases, no one else bids other than the former property owners, who can reclaim the properties for as little as $500 apiece.



• The increase has a top aide to Mayor Dave Bing and others calling on Wayne County Treasurer Raymond Wojtowicz or the state Legislature to crack down. "Unfortunately, some laws have loopholes, and in this case results in others exploiting matters for their personal advantage at the expense of responsible taxpayers and the city," Kirk Lewis, Bing's chief of staff, said in a statement.



• "Legislative remedies must address and prevent the myriad of ways these property owners can scam the system for their personal gain."

For more, see Homeowners buy back own property, dodge taxes.

NY Appeals Court: Missed Filing Deadline Not Enough To Dismiss Foreclosure Action

In New York City, Thomson Reuters reports:

• A Brooklyn judge should not have tossed a foreclosure case just because the foreclosing bank's counsel--from the scandal-plagued Steven J. Baum P.C. law firm--missed a deadline for filing paperwork rebutting its alleged conflict of interest, a New York appeals court has ruled.



• The unanimous, unsigned order from the Appellate Division, Second Department, restores the foreclosure action brought against Kelvy Guichardo by the trustee for his mortgage US Bank NA. The case had been dismissed sua sponte by Kings County Justice Arthur Schack in a Nov. 8, 2010 ruling.

For more, see Late foreclosure filing not grounds for dismissal: NY court.

For the ruling, see U.S. Bank, N.A. v Guichardo, 2011 NY Slip Op 09630 (App. Div. 2nd Dept. December 27, 2011).

Keypad Error Results In 80 Cent Mortgage Underpayment, Leading BofA To Boot Homeowner From Loan Modification Program

In Largo, Florida, The Tampa Tribune reports:

• When Tom Mudie was approved for a mortgage modification program, he thought his foreclosure troubles were over. Bank of America lowered his monthly payment by nearly $200. All he had to do was make the new payments — on time for three months — and the new amount would be made permanent.



• But a simple error — hitting a "0" on his telephone keypad instead of an "8" — threatened not only to cancel the savings but also to cost him his home. "I want to keep my home," Mudie said. "And to lose it over 80 cents is crazy."



• Mudie paid his second trial mortgage payment by phone. The keypad mistake meant that instead of paying $615.82, he paid $615.02. He was three quarters and a nickel short. The mistake meant that, in the precise calculus of the computer, Mudie broke his modification contract. He was kicked out of the program.



• Banking and government officials say his story reflects a broader trend of simple mistakes with consequences that are all out of proportion, hurting homeowners' modification chances.



• When he realized what happened, Mudie said, he contacted a customer service representative who told him to send a check for the 80 cents. That would clear up the problem, he said he was told.



• "I did everything they told me to," Mudie said. "I wrote the check for 80 cents, as crazy as that sounds. I included it with my next payment. They cashed it." But the next month, Bank of America sent back the 80 cents — plus the next payment he had made. Then a letter from the bank arrived bearing bad news: "Your loan is not eligible for the Fannie Mae modification program because you did not make all the required trial period plan payments by the end of the trial period."



• It goes on to say the foreclosure is back on track. Then other alarming paperwork arrived. "This home transition guide is through the United Way," read one pamphlet. "When you start seeing that," Mudie said, "you start thinking charities and stuff. So I knew that I am in trouble."

For more, see Typo involving 80 cents nearly cost man his home.

Cops Tack On Forgery Charge In Prosecution Of Adverse Possession-Claiming Squatter; Allegedly Used Phony Papers To Get Power In Snatched Vacant Home

In Douglasville, Georgia, the Douglasville Patch reports:

• Forgery will be added to the charges of criminal trespass and misdemeanor possession of marijuana for Roderick Walker who was arrested by the Douglas County Sheriff's Department on Dec. 22.



• Sheriff Phil Miller said that Walker forged a signature to get utilities turned on by Greystone Power at another person's home. Walker counsels others to claim vacant houses as their own.



• Walker first appeared on WSB-TV, explaining his use of the law of adverse possession to move into an abandoned Douglasville three-bedroom, 2½-bathroom house on Mackenzie Court; the house once was valued at almost $300,000.

Source: Add Forgery to Squatter's Charges (Forgery will be added to the charges of criminal trespass and misdemeanor possession of marijuana for Roderick Walker who was arrested by the Douglas County Sheriff's Department on Dec. 22).

Pennsylvania Man Gets 81 Months For Using Fraudulent POAs To Pocket Cash From Refinancing Homes Owned By Elderly Parents, Other Family Members

From the Office of the U.S. Attorney (Philadelphia, Pennsylvania):

• Anthony Iacono, Jr., 60, of Rutledge, PA, was sentenced [] to 81 months in prison for fraudulently obtaining over $2 million in cash, and real and personal property, announced United States Attorney Zane David Memeger. Iacono pleaded guilty to wire fraud, credit card fraud and aggravated identity theft charges on August 19, 2010.



• Judge Bartle described the actions of the defendant as committed with a "depravity of heart and mind." Iacono fraudulently obtained over $2 million in loans secured by properties owned by his parents and other family members using fraudulent powers of attorney and credit cards in the names of relatives and businesses owned by relatives.



• To obtain the credit card used in the identified credit card transactions, Iacono used the victims' names, dates of birth and social security numbers without permission. When he failed to pay the loans, his family bore the brunt of the lenders efforts to recover their money.



• In addition to the prison term, U.S. District Court Judge Harvey Bartle III ordered forfeiture and restitution in the amount of $2,098,000. There was no fine imposed because the Court found the defendant without means to pay one.

Source: Pennsylvania Man Sentenced For Identity Theft.

Financially Strapped Seniors Selling Off Pension, Retirement Payments To Meet Pressing Cash Needs?

In Greenville, North Carolina, The Daily Refector reports:

• Many people are doing whatever they can to make it to the next mortgage payment or bill paying day. In some cases people face foreclosure on their homes and need a large cash payment in order to stop the bank.



• Retirees and veterans who have a defined benefit pension now have another opportunity to get a lump sum payment but it does have a significant downside. They can sell the future stream of monthly pension payments to an investor who will provide a single lump sum of money in return.



• This use of the secondary market has become very attractive for many investors. One feature of the pension investment is that the retiree signs a contract that yields a 5-6 percent interest rate for the purchaser. These transactions also are facilitated by websites that seek retirees willing to sell their pensions. These middlemen bundle the pension investments and send a sheet showing all available options to investors. The investor works through the middleman in completing the purchase transaction.



• For this service the middleman agency collects a sizeable fee that is taken out of the stream of payments. Although the stated interest rate may only be 5-6 percent for the investor when the cost of middleman fees are added the effective interest rate is considerably higher.

***

• Congress has [] taken notice of the pension purchasing business. Sen. Tom Harkin of Iowa heads a U.S. Senate committee that is investigating the pension-for-cash contracting business.



• He is concerned that retirees are not fully aware of just how much interest they are paying as a result of signing away pension payments. There also is concern that retirees who are desperate have not thought through the effect of losing monthly payments.



• Even though the Senate investigation is in its infancy, the business of purchasing pensions is not. It is moving forward just as fast as investment firms can find new methods of advertising it.

For more, see Pension payments sold to middlemen.

Cops Begin Meeting With Local Homeowners, Residents To Address Concerns Over Adverse Possession-Claiming Squatters

In Douglasville, Georgia, The Holly Springs-Hickory Flat Patch reports:

• Members of the Douglasville Police Department and the Douglas County Sheriff's Department have scheduled a meeting on Jan. 3 with homeowners and residents that are concerned with squatters.



• Squatters have been using Georgia's adverse possession law, which is meant to resolve property disputes, to live in empty houses that are in a state of limbo. The process takes advantage of the high number of foreclosures and abandoned houses in recent years.



• "We want people to feel more comfortable and want them to know what to look for," said Det. Mac Abercrombie of the Douglasville Police Department. "We see a problem and want to help address a need.



• "We've been taking a pro-active approach to this problem," said Det. Mac Abercrombie of the Douglasville Police Department. "We've been planning this since October. This is not a reaction to recent stories in the news."

For the story, see Police Meet with Residents to Answer Squatting Questions (Members of the Douglasville Police Department and the Douglas County Sheriff's Department have scheduled a meeting on Jan. 3 with homeowners and residents that are concerned with squatters).

Texas Man Agrees To Plea Guilty In Fractional Interest Deed Transfer Foreclosure Rescue Scam

In Austin, Texas, the Austin American Statesman reports:

• A Lakeway man who has been accused of fraudulent business dealings at least twice has agreed to plead guilty in a new investigation involving allegations that he was paid to fraudulently delay foreclosures on behalf of distressed property owners, according to court documents.
• Frederic Alan Gladle, 53, is in jail awaiting his guilty plea to charges of bankruptcy fraud and aggravated identity theft. That plea is scheduled for Friday . He faces two to seven years in prison.
• From 2007 until his arrest in October, Gladle operated a business that helped distressed property owners delay foreclosure by paying a monthly fee — usually about $750 a month, according to prosecutors and charging documents.
• After clients signed up for his services, one of Gladle's salespeople had them sign deeds transferring a fractional share — usually one one-hundredth — of their distressed property, the documents said.
• The shares were transferred to an unrelated person who had previously filed a bankruptcy petition in court, the documents said. Those people were unaware that Gladle was using their names, which were obtained from online court records, the documents said.
• Gladle, or "a co-schemer operating at his direction," would then send a copy of the fractional deed and a copy of the unrelated person's bankruptcy petition to the lender that was expected to foreclose, the documents said.
• Because bankruptcy proceedings automatically delay foreclosure actions, the lender would not be able to immediately foreclose on Gladle's client's property, the documents said.
• Eventually, after the unrelated debtors claimed they knew nothing about owning the fractional interest, the foreclosure continued, according to the documents.
• Gladle would then go through the process again, causing further delay, the documents said. Through the course of the scheme, Gladle and his unnamed associates collected $1.6 million from clients and delayed the foreclosure sales of more than 1,100 properties, the documents said.(1)

For the story, see Lakeway man to plead guilty in scheme to delay foreclosures.

(1) See Final Report Of The Bankruptcy Foreclosure Scam Task Force for a discussion of fractional interest deed transfer scams and other foreclosure rescue rackets involving the abuse of the bankruptcy courts.

Citi Calls Off Erroneous Foreclosure, But Refuses To Bear Costs Incurred For Its Own Screw-Up

In St. Louis Park, Minnesota, the Star Tribune reports:

• In a last-minute move, Citi- Mortgage called off the foreclosure sale of a St. Louis Park house whose owner battled to stay in her home with the support of the Minnesota attorney general.



• Nancy Gosselin was scheduled to lose her house in a sheriff's auction scheduled for Tuesday, even though an investigation by the attorney general determined that at most, she had missed one payment of $584 more than two years ago. After Gosselin was featured in a Whistleblower column on Nov. 13, CitiMortgage postponed the foreclosure for a month. Then, this week, Gosselin got the good news.

***

• A receptionist at Sela Roofing, Gosselin refinanced her house with Bremer Bank for a $84,100, 20-year mortgage in 2005. Then the mortgage was sold to CitiMortgage. Gosselin said she never missed any payments, and a loan officer at Bremer Bank agreed. Yet CitiMortgage began assessing monthly late fees on the Xenwood Avenue house, which she repeatedly contested, and last spring the company refused to accept Gosselin's monthly payments and took action to sell the house at foreclosure.

***

• In a letter to William Gosiger of the attorney general's office, Susie Birmes of CitiMortgage's Executive Response Unit said it was waiving the late fees, reinstating the loan and canceling the foreclosure. But she said it was not waiving "foreclosure costs and attorney fees in the amount of $2,140.11," which "can be paid at any time during the life of the loan and will be required to pay ... in full, upon payoff."



• Gosselin remains furious about those charges and says she will not pay them. CitiMortgage can pay their legal fees out of their bailout money," she said. Her Bremer Bank loan officer, Stephan O'Connor, said she should not have to pay them, because she was not at fault.



• "If they are pursuing those [attorney fees], we will continue to go to bat for the homeowner to see whether the fees can be waived or reduced," said Ben Wogsland, a spokesman for Minnesota Attorney General Lori Swanson. "It's good that Ms. Gosselin will be able to stay in her home, that the sheriff sale has been called off and the loan has been reinstated."



• Nick Slade, a Minneapolis attorney who works on foreclosure cases, said it takes an enormous amount of time, energy and resources on the part of numerous people to get something done for a homeowner fighting foreclosure. "It's only when you bring in the level of firepower that happened in this case that they pull it out of the nightmare bin in the regular process and give it to somebody and really truly handle it in a way that makes sense," Slade said.

For the story, see Whistleblower: With help on high, foreclosure avoided (St. Louis Park woman has mortgage reinstated, but CitiMortgage still wants fees for its attorneys and foreclosure costs).

Maryland High Court: Criminal Conviction Invalid For Builder Who Accepted Cash From Customers, Then Failed To Deliver Homes

In Prince George's County, Maryland, The Washington Examiner reports:

• Maryland's highest court has affirmed the reversal of a theft conviction for a builder sentenced to 12 years behind bars for failing to construct Upper Marlboro homes he had contracts to develop.



• The Maryland Court of Appeals upheld a lower appellate court's decision to overturn Leon T. Coleman's June 2009 conviction in Prince George's County on charges of theft by deception and failing to deposit money into an escrow account.



• The "evidence was insufficient to conclude that Coleman intentionally deprived the buyers of their property," the Court of Appeals opinion says.



• The saga began in 2004, when Coleman entered into contracts with 10 families to build homes in an Upper Marlboro subdivision. The contracts said the buyers would purchase lots before their homes were built, according to court records. The buyers obtained loans for the purchases; Coleman used some their initial payments to buy the lots and put the rest in an escrow account, court documents say.



• But he never went forward with construction because he ran out of money before he could obtain the necessary permits.



• Prosecutors contended that Coleman never intended to build the homes, saying he didn't use the initial funds for construction and made "misrepresentations" about the development's progress. But that doesn't constitute theft, the appeals court said. "When a defendant has a right to receive money or property, he cannot be guilty of stealing it," the opinion says.



• The prosecution also argued that Coleman's failure to spend some of the funds he received implies that he kept the money for himself or spent it improperly. The appeals court, however, said there was no evidence that Coleman used the money for anything other than the construction project.



• Coleman was the first person prosecuted for building violations in Prince George's County under Maryland's Custom Home Protection Act, which requires builders to place advance payments in escrow accounts.



• But because the buyers received the property deeds before the homes were built, the act isn't relevant, according to the appeals court. The court said the act "does not apply when a builder or vendor deeds land without a home on it."



• Emma Coleman, the builder's wife, was also initially charged in the case, but the accusations against her were dropped.

Source: Maryland court affirms reversal of builder's theft conviction.

Bankruptcy Court Watchdog In Ongoing Probe Into Allegations Of Foreclosing Banksters' Mortgage Escrow Fee Double Dipping Yielding Million$ In Profit$

In New York City, the New York Post reports:

• Federal investigators are looking into allegations that banks have wrongly pocketed tens of millions of dollars from troubled homeowners by double-billing for mortgage escrow fees, The Post has learned.



• Exactly how much in phony profits the banks may have pocketed from this alleged practice is not known, but an analysis by The Post of bankruptcy cases in 2011 shows it could range higher than $150 million for just the new cases filed this year.



• The problem has gotten so out of hand that lawyers and accountants at the New York City office of US Trustee — charged with protecting the integrity of US bankruptcy courts — are poring over local Chapter 13 bankruptcy cases for evidence of wrongdoing.



• The federal investigators were tipped to the alleged practice by metro area bankruptcy lawyers. Cases specifically involved Wells Fargo and GMAC Mortgage, but lawyers say most banks had double-dipped.



• “It seems prevalent, and it’s a moneymaking machine,” David Shaev, a Manhattan bankruptcy defense lawyer, said of the banks’ double-dipping.



• Westchester bankruptcy defense lawyer Linda Tirelli says 75 percent of her clients face escrow double-billing by their lender or mortgage servicer, for amounts up to $2,800.



• Here’s how the double-dipping scam can be pulled off. Many homeowners opt to pay part of their property taxes and homeowners insurance with their mortgage every month. The funds are then put into an escrow account and used to periodically pay the taxes and insurance.



• But after falling behind on a few payments, troubled borrowers in Chapter 13 often find that their bank or mortgage servicer tries to collect twice on the escrow funds — once as part of the overall mortgage payment, and again as a separate “escrow shortage” charge.



• The average double charge is about $2,000, said forensic accountant Jay Patterson of Full Disclosure in Arkansas, who sees escrow issues in half the cases he examines. In 2011, there were 362,000 Chapter 13 cases filed nationwide, according to the National Bankruptcy Research Center. If three-quarters of those cases involved homeowners, and even one-third of that subset of cases had extra escrow charges of $2,000, then banks clobbered homeowners with an astonishing $179 million in false charges.



• Following on the heels of the widespread robo-signing scandal — where executives signed reams of foreclosure paperwork without reviewing it — the escrow double-dipping is just another example of the shoddy if not outright fraudulent practices by banks thirsty for profit above all else.

Source: Sloppy seconds: Feds probe million$ in 'double-billing' by banks.

Florida Supreme Court Slams Six Attorneys In 'Sticky Fingers' Syndrome Cases

The Florida Bar has recently issued its quarterly gossip sheet, listing Florida attorneys that have recently received one or more forms of discipline.

Among those making this quarter's hit parade for possibly playing fast and loose with the cash sitting in their client's trust account, or who otherwise suffered from 'sticky fingers' syndrome with regard to other people's money, are:

1. Ryan Scott Hobby, 836 W. Montrose St., Suite 1, Clermont, suspended until further order, following an October 6 court order. (Admitted to practice: 2005) According to a petition for emergency suspension, Hobby appeared to be causing great public harm by misappropriating client trust funds. Hobby admitted through counsel to making 13 improper transfers from his trust bank account to another bank account totaling $14,250. (Case No. SC11-1886)



2. John D. Hooker, 13610 E. U.S. Highway 92, Dover, suspended until further order, following an October 10 court order. (Admitted to practice: 1974) According to a petition for emergency suspension, Hooker appeared to be causing great public harm by misappropriating trust funds. Hooker improperly commingled funds. He also failed to maintain certain trust accounting records and follow mandatory trust accounting procedures. (Case No. SC11-1766)



3. James Lewis Hunter, 150 2nd Ave. N., Suite 1170, St. Petersburg, suspended until further order, following an October 10 court order. (Admitted to practice: 2004) According to a petition for emergency suspension, Hunter appeared to be causing great public harm by misappropriating client trust funds. He also abandoned his law practice. (Case No. SC11-1919)



4. James Crenshaw Kelley, 12651 S. Dixie Highway, Suite 201, Pinecrest, suspended until further order, following an October 31 court order. (Admitted to practice: 1977) According to a petition for emergency suspension, Kelley appeared to be causing great public harm by misappropriating and/or diverting funds entrusted to him. Kelley disbursed more than $124,000 that was deposited into his trust account for a client’s benefit, to himself for personal use. Kelley subsequently wrote the client, begging her not to report his actions to The Florida Bar. (Case No. SC11-2035)



5. Octavio Enrique Mestre, 9031 S.W. 162nd Court, Miami, disbarred following an October 11 court order. (Admitted to practice: 1992) In 2005, while acting as a settlement agent in a real estate transaction, Mestre failed to satisfy an underlying mortgage and in so doing, failed to preserve and apply the funds in accordance with Bar rules regulating trust accounts. (SC11-1867)



6. Gregg Adam Steinberg, 4441 Comanche Trail Blvd., Saint Johns, disbarred effective retroactive to August 30, 2010, following an October 7 court order. (Admitted to practice: 1993) Steinberg knowingly made false statements in court under oath; he failed to disclose that he was the subject of a pending criminal investigation; he misappropriated funds; and he engaged in a pattern of blaming others in an attempt to deflect attention from himself. (Case No. SC10-161)

In addition, one attorney received a scolding for associating himself with a loan modification group and sharing fees with nonlawyers:

• Curt G. Levine, 5036 Dr. Phillips Blvd., Suite 358, Orlando, publicly reprimanded following an October 6 court order. (Admitted to practice: 1973) Levine associated himself with a loan modification group and shared fees with nonlawyers. (Case No. SC10-536)

For the entire gossip sheet, see Disciplinary Actions (1/1/2012).

Wanna-Be House-Buying Couple Left Holding The Bag In Rent To Own Scam Involving Home In F'closure; Attorney: 'Protect Yourself - Get A Title Search!'

In Columbus, Ohio, WBNS-TV Channel 10 reports:

• With the real estate market down, and some financial problems in the past, the Kaiser family decided they would try to find a home with a lease-option to buy, Consumer 10’s Kurt Ludlow reported on Friday.



• Sandy and Tim Kaiser rented a condo, with a promise from the owner that he would sell them the condo in a few years. He promised to pay the association fees and the mortgage during that time. The Kaiser’s eventually discovered that the condo was in foreclosure.



• “I’m trying really hard not to be bitter about the fact that I think he knew from the beginning that he wasn’t going to be making his payments,” Sandy Kaiser said. “I think he just booked.”



• Lawyer Gary Price said what happened to the Kaisers could have been prevented if they had used a lawyer. “Lease to own, it's not the end of the world,” Price said. “Land installment contract's not the end of the world. But comply with the law."



• Under the law, any deal to sell property, even leasing to own, must be in writing, witnessed and notarized, Price said. "Find out who you're dealing with,” Price said. “Best way to do that, safest way to do that, and yes it costs a little money, is to get a title search.” Finally, the contract must be filed with the County Recorder, Price said.



• The Kaiser family said that they are waiting for the Sheriff to knock on their door. “I (have to) keep paying him, and he's already stealing from the bank is the way I look at it,” Tim Kaiser said.

Source: Risk Incurred In Renting To Own.

Minnesota Regulator Slams Loan Modification Racket For Clipping Desperate Homeowners For Illegal Upfront Fees; Victims To Get Refunds

In Bloomington, Minnesota, the Star Tribune reports:

• State regulators have yanked the license of a Bloomington mortgage modification company it says was preying on desperate homeowners.



• Mortgage Connection Inc., also called Mordicorp, didn't have the appropriate license, altered documents and charged illegal advance fees for loan modification services that it frequently failed to provide, the Commerce Department said Thursday. In some cases, the consumers fell behind even further on payments and are losing their homes in foreclosure.



• Thirty-six consumers, including about 19 in Minnesota, were charged on average more than $2,000 in advance fees for modifications they didn't receive. They will get refunds within the next 30 days, the department said.



• "Time and time again we see vulnerable homeowners turn over their last dollar in hopes that their homes might be saved," state Commerce Commissioner Mike Rothman said in a statement.



• The company's license has been revoked and its president, Augustus Odoom, has been barred from originating or servicing mortgages and must pay a civil fine of $40,000 if he doesn't return fees to customers, among other things, according to the consent agreement signed last week. Odoom, 58, is recently of Eden Prairie.

For the story, see State slams alleged Bloomington mortgage scammer (Consent agreement calls for consumers to get advance fees returned).

Lien Stripping Question In Chapter 13 Bankruptcy Proceedings Comes To A Head In Minnesota; Advocates Seek Case Law Consistency With Rest Of Country

The Minnesota Lawyer reports:

• [Minnesota]’s bankruptcy attorneys are hoping that a case before the 8th Circuit Court of Appeals will allow debtors to get out from under second mortgages in Chapter 13 bankruptcies and bring Minnesota in line with the rest of the country when it comes to a practice called lien stripping.

***

• “In the 1990s into the 2000s bankruptcy courts said you couldn’t do lien stripping on unsecured second mortgages, but over the past few years every other circuit except for the 8th started to change its mind and say you can do lien stripping if there is no value on the home,” [Bloomington bankruptcy attorney Craig Andresen] said. “As real estate values have plummeted now you have lots of totally unsecured second mortgages, and Minnesota is still saying that you can’t strip those liens. I felt that if every other court was allowing it, why not Minnesota? It’s time to get lien stripping approved by an appeals court.”

***

• Jasmine Keller, the Chapter 13 bankruptcy trustee for the District of Minnesota, agrees that second and third mortgages should be stripped because homeowners need help. She said some families have $200,000 mortgages on homes now worth $125,000. For them, lien stripping is no different than when corporations file for bankruptcy protection.

For more, see Lien stripping could be in state’s future (Case could allow practice now barred in bankruptcy).

Fla. AG Seeks State High Court Ruling On Applicability Of Deceptive Practices Law To Attorneys Creating, Using Invalid Assignments In F'closure Cases

In West Palm Beach, Florida, The Palm Beach Post reports:

• Florida Attorney General Pam Bondi wants the Supreme Court to weigh in on her failed bids to investigate foreclosure law firms, saying unlawful practices have put homeowners "at considerable risk."



• In what one lawmaker called Bondi's first aggressive move against so-called "foreclosure mills", she filed a request Wednesday for the 4th District Court of Appeal to send a query to Supreme Court justices about her investigatory authority.



• State subpoenas against the Law Offices of David J. Stern and the Boca Raton based-Shapiro and Fishman, were quashed in the 4th DCA with judges ruling the state has no power to pursue firms under the Florida Deceptive and Unfair Trade Practices. The losses effectively killed the state's ability to pursue civil charges against seven Florida firms currently under investigation.



• While this week's request is just the first step in getting a Supreme Court decision, some foreclosure defense attorneys and lawmakers lauded the move, saying high court rulings are needed to sort out the state's foreclosure morass.

***

• At issue in Bondi's request is whether the creation of invalid assignments of mortgages by a law firm and the use of the documents in court is an unfair or deceptive trade practice subject to state investigation.



• Assignments of mortgage are typically issued to banks as a way to show ownership. They have played a bigger role in foreclosure cases since the real estate bust as the chain of ownership records were obscured when loans were securitized.



• Earlier this month, the Florida Supreme Court took the unusual step of deciding to take up an already settled foreclosure case involving an allegedly backdated assignment. The opinion, the majority of justices wrote, could impact the "mortgage foreclosure crisis throughout this state."

***

• Bondi is besieged by critics who say she has been apathetic about the foreclosure investigations she mostly inherited from former Attorney General Bill McCollum. The furor came to a head over the summer when it was learned two of the leading foreclosure investigators had been forced to resign despite stellar performance evaluations.

For the story, see Florida's AG files motion requesting Supreme Court decision on foreclosure cases.